Red Ink at South Bay Hospital Forces 76 Layoffs

Falling victim to changes in medical insurance coverage and competition among hospitals, AMI South Bay Hospital laid off 76 of its 604 employees on Tuesday. Closure of two money-losing programs and loss of a key medical services contract were blamed.

“It’s like aerospace,� said Shelley Kullman, the hospital’s marketing chief. “When you lose a contract, you have a cut in staff until you contract with someone else. It’s a common occurrence with hospitals.�

Coinciding with the layoffs were closure of South Bay’s inpatient alcohol and substance-abuse rehabilitation program and a phase-out of the outpatient cardiac rehabilitation program, which serves 40 patients.

The hospital will continue offering drug and alcohol detoxification, which requires a two- to three-day hospital stay.

A fall-off in insurance coverage for inpatient substance-abuse care, together with competition from other hospitals and the growth of at-home rehabilitation for heart patients, made it financially unfeasible to continue the programs, Kullman said.

Lost Large Contract

The biggest blow, however, came in July when South Bay Hospital lost the hospital service contract it had for four years with Bay Shores Medical Group, which has headquarters in Redondo Beach. Kullman said about half of those hospitalized at South Bay--which has an average of 55 patients a day--came through Bay Shore physicians.

The layoffs included 18 people who worked in the two closed programs, as well as other employees in such areas as clerical, dietary services and housekeeping. They received severance pay based on length of employment as well as help in finding other jobs.

Kullman said the for-profit hospital in Redondo Beach has been in the red since losing the Bay Shores contract, which was transferred to Torrance Memorial Medical Center.

She declined to provide financial information about hospital costs and losses.

However, Marc Moser, administrator of the 90-physician Bay Shores group, said the group paid the hospital $25 million to $30 million for services to its patients during the last year of the contract. This included outpatients as well as those hospitalized.

Kullman said the figures are too high and called Moser’s disclosure of them totally inappropriate.

The two differ on why Bay Shores left South Bay Hospital. Moser contends that the hospital did not want to negotiate a new contract after the medical group sought competitive bids and began negotiating with Torrance Memorial and Little Company of Mary Hospital, which is also in Torrance.

Other Negotiations

Kullman said South Bay “had come close to a final� deal but Moser would not sign it and said he was negotiating with other hospitals. She said he was “trying to get the price down.� Moser, however, said the financial terms with Torrance Memorial are substantially what they were with South Bay.

South Bay Hospital, which is owned by the public South Bay Hospital District, was leased to AMI (American Medical International Inc.) for 30 years in 1984. AMI pays the district $3 million a year and has invested about $12 million in upgrading the hospital, which had fallen behind its competitors.

Kullman said that loss of the Bay Shores contract has prompted South Bay to orient itself toward private patients. It also is continuing work on a medical office building and placing emphasis on what it considers its strengths. These include an in-vitro fertilization program, the obstetrics unit, a male infertility program and neonatal intensive care.